Contractor Management

NDA and Intellectual Property Agreements for Contract Employees

Discover the essentials of protecting your business with our a Non-Disclosure Agreements (NDA) and Intellectual Property Agreements for Contract Employees.

Table of contents

Key Takeaways

  1. Intellectual property agreements protects any creation, such as literary works, artistic works, inventions, and more from unauthorized use.
  2. NDAs are similar to IPAs, but focus on confidentiality, while IPAs have broader coverage
  3. Businesses that work with contractors can use NDAs and IPAs to protect their IP
  4. Correctly classifying employees and contractors will help you create the strongest Ip agreements.

Intellectual property agreements are an important part of a flourishing business. When employees or contractors produce work for a business, companies own that work. Intellectual property covers any creation, such as literary works, artistic works, inventions, designs, symbols, names, images, computer code, and more.

When working with contractors, it’s especially important to clarify what the employer owns and what constitutes as misuse so contractors don’t use or share valuable assets that would devalue the company’s worth.

An NDA, or Non-Disclosure Agreement, is a legal contract that creates a confidential relationship, ensuring that sensitive information shared between parties remains private. It obligates those involved to not disclose or misuse the information for personal or competitive advantage.

Importance of contractor NDA agreements

IP agreements are crucial for contract employment, especially due to the flexible nature of contract work and the laws that declare how much control companies can have over contractors. IP Agreements protect both your business’s interests and the contractor’s intellectual rights, as well as prevent costly legal disputes over the rights to the brand, tech inventions, and more.

To protect your company, it’s important to know what to include in the intellectual property contract. Depending on the IP type, your contract will need to include specific amendments and conditions.

What are the types of intellectual property in contractor agreements?

Patents, trademarks, and copyrights are all examples of intellectual property. Employers may use a patent when working with a contracted website designer developer to protect their software from redistribution or duplication. If working with a graphic designer contractor, a trademark will protect and retain the value of your logo, fonts, or other visual traits.
A copyright IP agreement is ideal when working with a speechwriter or a software developer to protect the company and acknowledge them as the original creators.

It’s essential put IP in writing so that they protect your business, but this isn’t always easy with all the laws and nuances of IP.

If your business has too narrow a definition of IP, the contractor can legally share other trade secrets and confidential information. Geography can also complicate IP, but you can get around specific country laws you want to hire an international contractor, by adding a definition of IP that is protected in that location.

For example When a UK-based company hires a German software developer, they must assess  compliance to the UK’s IR35, based on the developer’s work location. Concurrently, an NDA should be drafted, outlining confidentiality terms and specifying the governing law, whether it be UK, Germany, or a mutually agreed jurisdiction, independent of the IR35 assessment.

Contracts should also specify who can access the intellectual property, when they can access it, and for how long. Many businesses will take steps to protect their data with a secure server or database or by using an NDA.

NDAs vs. IPAs

An NDA and an Intellectual Property Agreement for employees are distinct yet intertwined. An NDA focuses on confidentiality and protects sensitive information shared between parties. It also prevents using confidential information, whether that’s disclosing trade secrets, business strategies, or proprietary data.

Intellectual Property Agreements have broader coverage and address ownership, rights, and usage created or developed during a business relationship. This includes inventions, patents, trademarks, copyrights, and other creative works. The scope extends beyond confidentiality and covers the legal framework for the creation, ownership, and utilization of intellectual assets.

If used effectively, both agreements are essential to protecting different aspects of business relationships and assets. The first step towards protecting your company’s IP often begins with creating an agreement.

Drafting effective IP agreements

With an effective IP agreement, you can protect your company’s lucrative assets, but if the terms are too specific or the language is vague, you could face expensive lawsuits and reputational damage down the line. Here are the components you need to include when drafting a comprehensive IP agreement:

  • IP definition: When defining your IP, keep the definition broad so that contract protects all trade secrets and confidential information.
  • Ownership: Include who owns the intellectual property. Clarify that although contractors created IP during their contract, they do not own the rights to it.
  • Access: State who, when, and for how long parties can access IP to protect your data from leaks.
  • Confidentiality: It’s important to be proactive when it comes to security. Your contract should spell out a confidentiality clause and the consequences of failing to comply.
  • Recourse: Be as specific as possible when including the consequences of contract breaches. Explicitly state repercussions such as fines, penalties, or litigation.
  • Indemnification: Include an indemnity, which clarifies that one party must compensate the other for any damages.

Beyond these, you’ll likely negotiate IP terms with your contractors. In this process, it’s important to reach an agreement that respects each party’s rights.

 

Negotiating IP terms with contract employees

One of the most important aspects throughout IP negotiations is fairness. Protect your business and respects the contractor’s needs by including these checklist items:

  1. Understand your IP: Both you and the contractor need to know which types of IP are relevant for your business (eg. patents, trademarks, copyrights, trade secrets, or designs). Specify which rights you have over your IP and the rights and obligations contractors have.
  2. Learn each parties’ goals and interests: Identity the business and the contractor’s goals for a fair negotiation as well as how their interests may conflict with yours. To work towards a fair proposal, consider what you’re trying to achieve with your IP, the risks and benefits of sharing your IP, and more.
  3. Establish trust and heathy communication: IP negotiations can be sensitive. They involve sharing confidential information, necesitating a lot of trust. Acknowledge their perspective and show interest in their goals to protect your reputation and copacetic.
  4. Explore different options: Once you build trust with the contractor, you can come up with solutions that meet both of your interests and goals. Embrace creative ways to address IP issues, such as joint ownership or cross-licensing agreements.
  5. Negotiate the details: When negotiating the details of the IP agreement, be prepared to make concessions, but know which core interests and priorities to stand by. Avoid misunderstandings or misrepresentations by using clear language, documenting the process, and involving a legal expert.
  6. Review and follow up on the IP deal: Make sure the agreement is clear, contains everything your business needs to protect itself, and is enforceable. Stay involved during the implantation process in case any issues come up and prioritize a good relationship with the contractor for future IP negotiations.

You’ll likely need to adjust your IP agreement when working with contractors vs. employees. As employers have less control over how contractors perform work, there are additional considerations you can take to protect the business.

Intellectual property agreements for contract employees

Contractors may increase IP risks, so it’s especially important for your business to include aspects such as:

  • Ownership of IP during the contract period: Clearly state in the written agreement who owns the IP to avoid confusion.
  • Use rights: Specify that deliverables related to the IP will be owned by the company.
  • Royalty arrangements: If applicable, use royalty arrangements to allow the contractor to use your IP in exchange for royalty payment.
  • Confidentiality clauses: Include confidentiality clauses and how the contractor should handle sensitive information during and after the project’s completion.

The next step after hiring contractors and establishing IP agreements is to consider your legal responsibilities. Global companies may need to adhere to national and international laws and agreements.

International legal framework surrounding NDA and contract employees

Two of the most common laws regarding intellectual property in the context of contract employment are the United States’ Copyright Act, and the Berne Convention.

The United States‘ Copyright Act states that under the copyright law, when a work is “made for hire,” the employer (and not necessarily the contractor/creator of the work) is considered the author and owns all the rights associated with the work. Copyright protection depends on any national laws where the parties seek protection.

The Berne Convention is an international multi-party contract on a border-crossing system that provides authors, musicians, painters, and other creators the means to control how their works are used, by whom, and on what terms. When working with international contractors, check whether their home country accepts the Berne Convention, as not all abide by the agreement.

To further understand copyright, let’s examine a real life example. In 2010, Oracle sued Google for infringing on their Java APIs copyright and using over 11,000 lines of code from Java SE into Android. In Oracle v. Google, The Supreme Court eventually ruled that Google’s act was fair use as a matter of law.
This case demonstrates how the digital era has transformed the way we create, share, and protect intellectual property, and the challenges brought on by digital technology.

Managing IP post-employment

Because it’s so easy to instantly publish material on the internet, IP is especially vulnerable in fields such as software development, digital media, and online content creation.
Protect your IP with a comprehensive contractor agreement that specifies who owns the IP, consequences of misuse, and which steps you’ll take to resolve the issue.

In the case of an IP dispute, mediation, arbitration, and legal recourse can help you and the contractor reach a decision that preserves your relationship, such as licensing agreements or co-existence arrangements. Be sure to document the agreements in writing with your signature and the contractor’s.

If you decide to terminate your contract with the contractor, they’ll need to return all confidential information. Remind the contractor that they cannot share your IP with a competitor for the specified number of years.

Technology can also help you manage your IPs in the online world. From copyrights to watermarks, here are a few ways to protect your digital property.

Technology and NDAs

Online content has only grown more valuable in the digital age. You can protect digital content with trademarks, copyrights, and/or watermarks. Another tool that will protect your online IP is a content portal that restricts access for non-subscribers.

Robust digital security can also help prevent unauthorized access, distribution, or reproduction of your creations. Technology such as encryption and password protection can secure sensitive files, while digital rights management (DRM) solutions can control the use and distribution of your digital content.

Even though the technology has made IP more global, most complex IP disputes are brought before the courts in each state where protection is sought. There are a few international and regional intellectual property offices such as the World Intellectual Property Office (WIPO), the European Patent Office (EPO) and the EU Intellectual Property Office (EUIPO) that create practices and procedures on an international and regional basis.

When applying for individual patents or trademarks in a foreign country, contact the intellectual property office in that country. Your company can also look into international patent, trademark, and design protection through The Patent Cooperation Treaty (PCT), The Madrid Protocol, and WIPO.

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FAQs

Who owns intellectual property created by independent contractors?

There’s a difference between intellectual property created by your employees and intellectual property created by your independent contractors. The owner of the intellectual property depends on the type of work performed and the agreements, if any, in place between your company and the contractor. Typically, independent contractors own the intellectual property in the works they create, even if the work was created at your company’s worksite.To avoid this and make sure your company owns the the intellectual property have written agreement with your contractor that clerly states that the engagement is a “work for hire” agreement and contain a clause where the contractor assigns your company all intellectual property in the work they create.

How can businesses protect their IP when hiring contract employees?

It’s essential to have a written contract that both parties sign to protect your IP. In the contract, state that your company owns the rights to the IP and outline whether the contractor will receive any royalties, use rights, or so on. Finally, include the consequences of defying the contract and have both parties sign the agreement.

What are the legal consequences of violating an IP agreement?

Depending on the agreement, violation of an IP agreement can have several penalties. For instance, willful copyright infringement can result in criminal penalties including imprisonment, fines of up to $250,000 per offence, and civil judgments. Any illegal works and products can also be destroyed.

Can a contract employee patent an invention developed during their contract period?

Only the inventor can patent the invention. If the inventor is your business, the business can claim credit for what you produced or invented. Generally, an employment agreement states that the invention ownership is assigned to the employer, so the company gets receives the profits.

How do digital technologies impact IP agreements?

Digital technologies can help you protect you IP on a large scale. For example, digital rights management technologies allow owners to control the use and distribution of their digital content. These technologies can also protect against someone stealing the content and unauthorized use of IP.

Are there international laws governing IP for contract employees?

There are no laws every single nation agrees to when it comes to IP or copyright, thoiugh there are protection treaties. The Berne Convention for instance protects works and the rights of their authors. To protect their IP, companies can also consult with international and regional intellectual property offices such as the World Intellectual Property Office (WIPO), the European Patent Office (EPO) and the EU Intellectual Property Office (EUIPO).